October 15, 2007 (PLANSPONSOR.com) - New Hampshire
Governor John Lynch called the state's place at the bottom
rung of pension plan performance for the past decade
"inexcusable," and has entrusted a special commission to look
at ways to dig the fund out of its spot at the bottom
quarter.

According to the Manchester (NH) Union Leader, the
commission is headed by former Senate President Bill
Bartlett, who said when he first looked at the retirement
system books: “It was really shocking … I couldn’t
believe the system was in such a state.”

The plan is less than 60% funded, short by about $3
billion on its annuity fund alone, partly because
trustees and lawmakers failed to act on warnings that its
accounting methods and earning assumptions would get into
trouble, according to a legislative subcommittee that
studies investments.

Recent findings of the subcommittee, which were
cited by Lynch, found that the plan produced an average
7.9% annual return over the past 10 years. Senator Harold
Janeway, who heads the subcommittee, said that the return
would have been 8.3% if the state had matched industry
averages in most of its investments. That would have
produced an extra $24 million a year.

The state must also explore new ways the fund
health insurance subsidies, cost of living increases and
retired state workers health insurance, following a
recent legislative block against funneling retirement
fund money to special accounts to cover such
benefits.

Another report also criticized the state’s
accounting methods, saying that neither the board nor the
Legislature acted on warnings that employer contribution
rates were too low, severance packages for retiring
workers were too high, and accounting methods the fund
used were not accepted by any other public plan in the
country.

“It’s not something we can fix overnight, but with
the depth of expertise on this panel, I think we will be
able to adopt some changes that will, over time, fix the
system,” Lynch said, according to the news report.